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Investing.com -- There are “small signs of acceleration” in the IT spending growth environment for 2026, according to Morgan Stanley’s 3Q25 CIO Survey, though overall sentiment remains cautious.
The bank’s analysts said in a note on Thursday that its “initial read on 2026 CIO IT budget growth expectations is slightly more upbeat, with growth projected to edge up by c. 20bps y/y to +3.8%.”
The analysts added that “overall IT budget growth expectations are still below the 10-year pre-Covid historical average of 4.1%.”
The “up-to-down ratio,” which measures whether CIOs are revising budgets higher or lower, reportedly “remained below 1x throughout our 2025 CIO surveys,” Morgan Stanley said. “This indicates that still more CIOs expect 2025 budgets to be revised downwards than upwards.”
While short-term revisions remain subdued, medium-term expectations are said to have improved slightly.
“Slightly fewer CIOs expect IT spending (as a % of revenue) to decrease over the next three years,” Morgan Stanley said, calling the shift “an incremental positive for medium-term IT budget growth.”
By sector, “Software continues to lead the pack with 3.9% growth,” while “IT Services was the only sector category where CIOs expect budget growth to sequentially decelerate in 2025.”
The analysts said this supports their cautious view of the IT Services sector.
AI remains the top CIO spending priority, followed by security software and digital transformation.
“A majority of CIOs continue to report that funding for AI initiatives comes from net new budget dollars,” Morgan Stanley said. However, “37% will not see their first AI/LLM-related project in production until 2026 or onwards.”